Bitcoin Forum

Let's say Bitcoin is a success and continues to grow thus the Bitcoin price continues to rise, generally.

How could employers pay wages in Bitcoin?

He couldn't really make a contract with a fixed wage because it could quickly become too expensive for his business, could he?

I suppose he could pay wages in Bitcoin on calculated on a Dollar-basis. But I how could that work a pure-Bitcoin economy? You would need some kind of price index instead.

It *can* work like this:

http://ciyam.org/open

(site is still being developed but not far from complete - get ready to earn BTC for tasks in a professionally organised way)

This would only be important if there would be a hyperdeflation, like wages in a hyperinfaltion.

With normal inflation you get a fixed amount and for big industries the labor unions each year negotiate how much more (1 - 3% for example) the workers get.

Only difference would be, with Bitcoin they would negotiate how much less you get.

If the company's revenue is all in bitcoins, it would be easy for wages to be in bitcoins. If conversion to another currency is required, then that currency would be the wage base.

Yes, but why should workers negotiate at all? If they refuse to negotiate then nothing changes and they get to keep their high wages.

In the reverse scenario (workers needing higher wages because of inflation) the workers can go on strike and thus push the employers to the negotiation table.

The employers in the Bitcoin scenario would have to shut down the business or fire the employees to have a similar effect, both of which don't seem very viable options.

Assuming we have a deflationary scenario, which seems likely if use of Bitcoins continues to become more widespread, then the company's Bitcoin revenue would be continually decreasing (as prices go down). This wouldn't be problem for external costs (such as materials or buying stock) but for internal costs, such as wages it would be if the wages are fixed.

Well first of all this is all theoretical because Bitcoin is far too volatile for wages to be paid however hypothetically imagine a future where adoption is very high.  The BTC money supply is worth tens of billions a year and the purchasing power of 1 BTC is rising by a small but relatively consistent rate of say 5% annually.

An employer could offer an employee an annual salary of 5 BTC for the first year with a contract that the salary decrease by 5% per year with the potential of a partial offset for merit raises.  Even better would be a sort of third party CPI type number used to calculate the buying power.  The salary would be reduced by that metric instead of a fixed 5%.

In the interim I think a traditional fiat salary which is converted at payday partially or fully into BTC and paid to the employee is probably more realistic.

I'm sure you can add this in contracts like 3% less each year and than they negotiate to get less less  :P

This is already the case for other areas. In the Industry where I work, our customers usually make 5 - 10 Year contracts with us. And its already in our standard contracts that our part price is reduced by 5% each year, due to cheaper production.

Right on - and already under development. :)

Good question. Bind wage to gold price / real estate prices? Whichever it will be it will be earning less will be psychologically hard to digest.

Mageant, I can't think of any reason that would prevent employers from hiring employees with the understanding that their salary is subject to change annually or semi-annually based on the fluctuations in the currency exchange rate.

Try thinking *tasks* not *jobs*.

If you don't know how much the price will change in terms of BTC in the next X days, but have some estimations for the next Y days, then you simply negotiate a price within this timeframe. With an option to renegotiate later.

Another option: use USD (or EUR, or $AAPL or whatever) as a reference point if both parties agree. You can say "I'll pay you next month amount in BTC equal to X USD according to the average price on Mt. Gox".

That might work for you IT guys, or any other where Work is part of a Project.

But you Guys tend to forget that you are the exception, not the standard.

I have a hard time defining payment by tasks on a assembly line, where an overperformer does as much damage as an underperformer.

And I find it impossible to do that for a cashier in a supermarket.

Sure - this is something *new* and maybe not applicable to everything (yet) but now I would say "try thinking of results".

:)

I see no reason why labour unions and employers cannot switch roles.

A labour union and an employer are in a symbiotic relationship. Both benefit from the jobs offered by the employer and accepted by the labour union. Just as the union can decide to go on strike now, which harms both union and employer, the employer can "go on strike" by shutting down—harming both parties.

With a volatile value like Bitcoin's, negotiation will have to occur eventually—by both sides. Both the labour union and the employer have the option of going on strike if the other does not agree to negotiate.

As Akka said. But I agree that this is where we shall go. Companies might also disappear, leaving their place to a more intricate and organic structure.

In the meantime ;), I think it's a good idea to index salaries to a collection of instruments. Food, housing, luxuries, etc. Even for fiat salaries, I don't know why this is not the convention.

According to main stream economists, prices have stickiness, and also the public, including capitalists and business leaders, are not informed about the fluctuating value of the standard currency.

Frankly, I don't think either of these points are important in the long run. If bitcoin is used, that would be the standard currency. After a while, people would be happy with falling prices, and would also accept slightly lower wages.

If the latter is not true, that will lead to existing businesses retracting and openings for new businesses (with lower wages), thus intensifying restructuring.

this

Alternately, a person might get hired as a janitor for 5 BTC per year, work his way up over a 30 year long career and retire as a manager still making 5 BTC per year.

Why not treat it like apartment leases, where every 6 to 12 months both parties can come together, discuss their situation (tougher times for the company v.s. have been an excellent employee performing all duties well), and renegotiate the pay? That way good employees can defend their income, the company can readjust expenses if something happens, and bad employees can be slowly gotten rid of as they quit due to lower pay.

One could envision new ways of paying wages in bitcoin. You could pay pickers by the bushel. Every time they dump a new load, their wallet is sent an amount. This could work for all sorts of projects in an automated way. Forget being paid "by the hour". Why not "by the ...??"

.... when the BTC market scales to this size, the transaction fees of 0.0005 BTC would "suddenly" become a serious expense, so, payouts would be made as rarely as possible, and very likely some banks would print fractional-reserve milli-BTC notes to use as cash based on true bitcoins, and new "lite payment" system would arise

Unless the BTC market scales to this size "suddenly" the transaction fee won't "suddenly" become a serious expense.

The transaction fee can be whatever you want it to be, from zero to everything in your wallet.

It's a weird concept to think about salaries with a deflationary currency.  Instead of an "annual raise" you'd get an "annual cut"...

Imagine coming home from work and saying to the wife "Got my annual cut today, only 3%!"..."Congratulations!"

It IS weird to think that way but only because we are so accustom to the idea that prices always rise.  What if the wife's response was "That's great the power company announced a 7% cut in our electric rates. More coins to put in cold storage".   

Ok maybe that isn't going to happen. :)

Eventually I would imagine that Bitcoin's value will be much more stable than it is now.  Slow deflation, yes, but not something where you'd see a huge price cut every year.

One way I've been considering (given that I'm in construction with many migrant day-rate subcontracting workers, many of whom send money home) is to give them the option of being paid in Bitcoin rather than as a bank transfer.  We wouldn't want to offer part bank/part BTC because the company pays a fixed bank fee per transaction so there's be the additional administrative overhead of the Bitcoin payment without the saving of the transfer fee.

The way I envisage it (and I'd welcome comments/suggestions) is to set up a system which would take a single DistributingAddress and for each subbie a BitcoinAddress, SplitRatio and IsOptedForBitcoin field.  So the way the process would work is:

• The pay run list is generated as it is now showing who is owed what after tax;
• The list is split to into two with those having opted for Bitcoin on one and those to be paid by bank transfer on the other;
• From the total to be paid in Bitcoin the ratio to be paid to each subbie is calculated and put against their receiving address;
• From fiat already sitting on MtGox the total (plus transaction fee) is converted;
• The exact Bitcoin sum converted is sent as one lump to the distributing address;
• The system automatically splits that lump according to the ratios and forwards to the subbie addresses;
• From an accounting/record-keeping perspective the net element of each Bitcoin subbie's pay would be paid off as its fiat value against the MtGox account.

In terms of additional processes, on the pay run database it would be pretty straightforward to pick up who has opted for BTC from the distribution system and to calculate the ratios to export for import into the distribution system.  The administrative and cost saving would be obtained from having a shorter list of folk to pay by bank transfer.  Maybe it would even be possible to have the distribution system in the cloud so subbies could have access to amend their receiving address themselves and to select/deselect their preference for BTC/GBP as frequently as they want?

I could even make myself some pocket money by turning up on site at the end of the day on pay day to buy Bitcoin from anyone who wants some of it as GBP cash straight away!

OK, so I think this is now great in principle.  The only problem I see is that I don't think the bank transfer charge for the amounts we pay is as high as the .6% MtGox transfer charge (plus cost of wiring the money to japan) would work out.  Ah well!  Nice thought.

For now I guess it would take demand from the subbies for this and a preparedness to take a hit on their pay to cover their costs - which they'd only be prepared to do if they understood Bitcoin well enough already that they would consider transferring their fiat to Bitcoin themselves (for saving/investing, for international transfer or for silk road)!  Anyone here London-based who speaks Romanian/Polish/Lithuanian/Albanian well enough to come to site to sell the advantages of Bitcoin ;)

Maybe also instead of using MtGox we could build a relationship with a Bitcoin dealer to negotiate a better rate.

If we did get this far and it worked then we'd also be able to offer to our off-shore clients to make the company part-payments in Bitcoin, thus saving them international wire transfer fees and delays.  Then we're cooking on gas!

i get blank page :-\

Try now.

(sorry might have been doing some upgrades when you tried before)

Also you *need* to have JS enabled and it must support sessionStorage/localStorage (although I would have thought you'd see a message about that - PM me if still having troubles - this is why it is still in Beta).

Actually, if the money supply is constant, the average salary would decrease only if the workforce increases. Giving the world's demographic trend, it wouldn't be impossible for the opposite to start happening in many places a few decades from now.

Maybe employers can use these purported "problems" of paying in bitcoins to argue that wages should be paid in freicoins, with the workers free of course to use those freicoins to buy bitcoins with if they choose to. Freicoin seems to need some lure to lure people into it, maybe employers would be good people to approach about the idea of using freicoin instead of bitcoin, if only for paying employees...

-MarkM-

It may not be deflationary in the long term, but is there a fundamental about Freicoin that ensures higher stability than Bitcoin?

Its not about stability, its about saving your precious bitcoins and spending stuff that loses value constantly by design ("demurrage") so as to try to force it to be better for spending than for saving. (Everyone wants to get rid of it as it devalues b y about 5% per year. So give it out to the working class as pocket money for wages, let them (try to) buy bitcoins with it if they want to save, or food clothing shelter with it if they want food clothing shelter...

-MarkM-

You are ignoring that Bitcoin also has demurrage, though far less regular. Every coin will eventually be lost, most of them not purposely. Demurrage in Bitcoin can be minimized, but it will never be eliminated.

No, the Bitcoins being lost has the opposite effect than demurrage in that it increases the value of all remaining Bitcoin.  The point with demurrage is that there is an associated cost with holding onto currency.  By holding it it loses value.  From what I understand in the case of freicoin it's as if the coins are slowly seeping out of your wallet to the miners.  The purpose is to encourage people to invest and to spend; to give an incentive to its users to keep the money moving.  Although I sort-of see why that might be a good idea I don't understand why people would choose for themselves to use such a currency over one that does not lose value.  But that's something for another thread :)

Exactly....  (BTC's value of the workers country's currency - at the time of payroll)...  simple simple. 

Someday in the distant future, we'll all be trading the same bitcoin and will have resorted to the satoshi  :o

I think that's a ways off tho  ;D

Also, I support the idea of working by the amount of work done.  However, a lot of jobs in the services industry never have an exact amount of work for you to do.  A security guard, for example, would have to be paid by the hour.  Considering a lot of our jobs are being sucked up by machines and the only jobs left will be the jobs a machine can't do, an hourly wage or a salary would be only way to go.

From there, I suppose it would work relatively the same as today, except when payday comes around, you'll get sent an amount based on the time you worked to the code you supplied to your employer.

That's why I'm asking. If Freicoin ends up to be volatile as a consequence of its nature, it won't be suitable for goods, which would make it unsuitable for wages. I think vendors would prefer pricing in BTC rather than freicoins, which defeats the purpose of denominating wages in Freicoin.

The answer is that even if wages were paid in Bitcoins, they would not be a fixed quantity of Bitcoins.  If wages are paid in a commodity whose value fluctuates a lot (such as Bitcoin), it would make sense to try and define the amount in terms of a fixed amount of purchasing power.  One way to do this is to use a commodity price index for a basket of commodities.   

Bitcoin, in conjunction with contracts using commodity price indexes, can thus come fairly close to what Hayek envisages in The Denationalisation of Money.  Bitcoin on its own can't.

Though the large fiat currencies lose lots of value over time, they're not all that volatile, normally only losing a few percent of their value per year.  Wages defined in these fiats thus tend to lose a few percent a year in value in real terms automatically.  This tends to be manageable because of the smoothness, lowish annual rate of change, and ability to negotiate new rates from time to time.  Bitcoin, gold, or anything with a fixed amount in existence, is unlikely to be suitable for fixing wages in directly, because their value will naturally be more volatile.

If a company makes btc profits only, workers can be entitled to a percent share of profits based on their position, hours worked, etc. Call it a co-op, an employee-owned company, or whatever you like. It would take some active involvement of everyone to manage things and renegotiate all pieces of cake when new hires are made or people quit, but there are historical examples where this worked (see worker self-management).
Bitcoin would further enhance things by providing necessary transparency and audit trail.

Example: majority of people involved decides to hire a new engineer. Everyone's share is reduced to accomodate for the new hire's sallary of 1.23% of the net profit. The net profit is expected to increase due to increased productivity, so everyone's happy.
 

Sure, tying bitcoin to commodities via contracts would certainly stabilize bitcoin prices.  However, I don't see why it has to be tied in with wages.  We need actual commodity producers and consumers trading commodities for bitcoin and bitcoin for commodities.  Once this is happening, bitcoin can be used to specify wages.  If you tie the wages directly to the commodities, you have a whole lot of people interested in increasing the price of commodities without actually wanting to consume them.  You'll get manipulation and false signals all the time and things will be way more volatile than they need to be.

How would a Manufacturer of goods pay in bitcoin?
Example: would a bed springs manufacturer who takes spools of metal and runs it through machines to create springs pay for raw material and sell it`s products in bitcoin? If so at what price?

Also, would the Company that purchases those bed springs to cover them up
with material before selling them to the furniture stores for bitcoin, pay for material in
bitcoin as well as pay its workers in bitcoin? at what price?

I think we have a very long way before bitcoin replaces fiat money  >:(

In our current inflationary system, the bulk of the power is granted to the business owners. Owners are free to bully their employees, refuse to give wage increases, and attack unions.

With a deflationary system, the power is reversed. The employees can choose to decline wage decreases if they do not consider them fair—leaving the owners to negotiate properly with the unions.

Paying wages in a deflationary system is more fair, not less so.

Ask metal supplier for bitcoin address, select send bitcoins, enter address and amount.  The price would be set by the supplier, same as it is with fiat.


Maybe.  Although having the entire supply chain and output chain in BTC has some advantages, each interaction can use a different payment method if they wish.  Again, manufacturer/supplier usually sets the price.


Duh.  However, business to business payments are taking place today in bitcoin.  Additionally, a very small group of people do earn a portion of their wages in bitcoin.  Personally, I've done several programming jobs for bitcoin.

It will start with the mattress retailer, who will use a payment processor like BitPay to accept bitcoins from their customers and get paid in local currency.

At some point the retailer will start asking its suppliers if any of them are willing to take bitcoins instead of dollars, or perhaps their overseas supplier will approach them and ask for bitcoins because they like the faster clearing time.

In this way Bitcoin adoption starts out on the edges of the supply chain and works its way inward.

Interesting point.  This did occur to me when reading the book I mentioned.  The risk in general is that by trying to make the purchasing power of a volatile but monetised commodity stable by tying it to a basket of commodities, you cause the unintended side effect of monetising all the commodities in the basket, making them unnecessarily expensive to consume.  This wasn't addressed to Hayek in the book.  He does talk about an issuer of his hypothetical money buying some of the actual commodities to maintain rates, but he doesn't mention the risks around making whole classes of commodities less consumable in the process.

I think the simplest way this could be done is just by tying them to the dollar. Otherwise fixed BTC salaries I think are wayyy down the line.

Pay based on company performance could definitely work, and is already done with stock options today, however, co-op management and your example likely won't. Employees often don't have management skills, and can't see the whole of business operations from the top, and thus can't make business changing decisions like where to concentrate resources or whom to hire.


And employees are free to leave and find a job elsewhere. The job isn't the employee's, it's given to them by the business owners.


The employee can decide to decline a wage decrease, and the owners will just fire them. Especially if the business doesn't make enough money to afford them any more. The power is still will the one who owns the business, and gives the jobs.

The job is taken by the employees.

The business can decide to decline a wage increase, and the employees will just leave.

Employees and owners are a symbiotic relationship. Neither can live without the other. The more dominant in the relationship depends on which one maintaining the status quo benefits (owners in inflationary economy, employees in deflationary one).

I believe dominance should be determined by how independent the employees are - having transferable skills, not being dependent on a single job, being able to ask for increased job compensation without fear of being laid off, and if they are laid off, being able to find another job or resort to starting a business themselves - and that it should NOT be determined by how much power and force the employee can exhert over the employer, either through threats of union strikes, or legal controls and regulations.
I feel completely comfortable with my employees working on side projects, learning new things, and ask them to update their resumes at least once a year with whatever new skills and tasks they have picked up recently. I WANT them to feel like they don't depend on me, because them not feeling tied to me and their job actually keeps us on friendlier, more open, and more even terms, and keeps the business more productive and innovative. If my employees were in a union, or had some sort of control over keeping their job against my will, the work environment would have been a lot more stressful, with "me vs you" tensions rising often.

Suppressing a voluntary union is asserting dominance. I don't support mandatory unions, but trying to eliminate all unions is effectively bullying your employees.